I love listening to my clients’ stories. One of my favorites is hearing about how a particular stock became part of their portfolio. Sometimes the story is told wistfully, like one about a beloved spouse who died too soon and left his young wife with shares of his company stock. I imagine her grieving and looking at those shares as a possible way to pick up the pieces and build a new version of the life they had imagined together. At other times, it is about a favorite grandparent who gifted shares of stock as a graduation present. Those shares have reliably shown up in monthly statements though the ups and downs of life, and are still there at retirement age. At still other times, the stock that was given when a parent died serves as a gentle reminder that even in death, the parent was passing along wealth and wisdom to their child. Each of these stories is beautiful and distinct, and every time I hear one of them, I smile as I listen to family histories that are laced with love. Among all the differences, I have come to notice a common feature: we feel an obligation or a loyalty to the stock—and I think the loyalty is really to the person who gave the gift, not to the institution. What would happen if we let go of the stock to open up possibilities for ourselves and for others? There are two barriers that tend to keep people trapped in the obligation to hold onto their stock:
- We feel we are being disrespectful by returning something that was given to us.
- We are unsure of the best way to use the gift.
We all know the feeling of opening up a gift, smiling politely, and secretly checking it off as a “to be returned” item. I have, on occasion, swapped a sweater my mom gave me for a different one, and I feel a little bit bad about it. However, stocks aren’t sweaters. No one ventures into the Stock Store to change their XY stock for a different color. Unlike sweaters and other personal gifts, stocks are made to be used and traded: billions of dollars are exchanged daily on the market, as people and institutions buy and sell their holdings. There is no shame in selling stock. In fact, selling a stock is an integral part of owning it.
The best use
Let’s imagine it this way: If my grandmother gave me shares of AB stock when I graduated from college, could I use those funds to start a diversified portfolio? What if I earmarked those funds for a particular expense rather than tying their use directly to AB company? Can we untangle the gift from the institution? The answer to these questions is a resounding yes, and it opens the door for those gifts to be used much more effectively. I have a few ideas to shape your creative thinking as you evaluate the role of various stocks in your portfolios.
- Fund a cause. Find a cause that was important to the grantor and use some of the proceeds to make a gift in their honor. For example, if the funds were given years ago as a college graduation gift, maybe you could donate to the grantor’s alma mater. Or perhaps it would be more meaningful to sponsor a semester of study for a young person just starting out.
- Build a diversified portfolio. The risk of owning a single stock is akin to putting all your proverbial eggs in one basket, so consider trading the stock for a diversified portfolio to be a good steward of the funds. Maybe the newly diversified portfolio can contribute to a successful retirement in the future. You might create a separate account for the proceeds, so you can always look at it and see how the gift has grown over time.
- Make the funds yours. Create a specialized portfolio to match your values. Perhaps the stock is from a company that doesn’t align with your particular values—what if you sold the stock to build a socially responsible portfolio?
- Change their path. Give a gift that creates a new family story. What if those funds help someone buy their first home, pay off student debt, or send a young child to preschool? Could you use the funds to change the arc of someone’s life, just as they changed yours?
Let’s consider the possibilities waiting to be discovered, as you ponder options for your portfolio and your hopes for the future of those funds. Where do you want them to end up? How will you empower your beneficiaries to use them strategically in the future? How can you best honor the person who gave you the gift? How will those funds contribute to your goals for the future? The choice is yours and the options are limitless, so please share your stories with us about trading an old stock to create a brighter future.
This content is developed from sources believed to be providing accurate information, and provided by ReFrame Wealth, LLC. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.